B. Is not 4.26.... What is the correct answer? B Only. THanks Consider the follo

Question

B. Is not 4.26.... What is the correct answer? B Only. THanks

Consider the following income statement for WatchoverU Savings Inc. (in millions): What is WatchoverU's expected net interest income at year-end? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places, (e.g., 32.16)) Net interest income$ 3.72 million What will be the net interest income at year-end if interest rates rise by 1 percent? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places, (e.g., 32.16)) Net interest income$ 4.26 million

Explanation / Answer

a Expected Net Interest Income at the year end statement Interest Earned Value of Assets Interest rate Interest Earned on floating rate mortgage 54 10% 5.4 30 year Fixed rate loan 54 7% 3.78 A Total Interest Earned 9.18 Interest Expenses Value of Liabilities Interest rate Interest Earned NOW accounts 74 6% 4.44 Time deposit 17 6% 1.02 B Total Interest Expenses 5.46 Net Interest Income (A-B) $                    3.72 Mn b Expected Net Interest Income at the year end statement with 1% interest hike Interest Earned Value of Assets Interest rate Interest Earned Remarks on floating rate mortgage 54 11% 5.94 Only floating rate will change 30 year Fixed rate loan 54 7% 3.78 A Total Interest Earned 9.72 Interest Expenses Value of Liabilities Interest rate Interest Earned NOW accounts 74 6% 4.44 Only floating rate will change Time deposit 17 6% 1.02 B Total Interest Expenses 5.46 Net Interest Income (A-B) $                    4.26 Mn

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